MAR 2015 – Difficult decisions
The Financial Policy Committee meets again on 24th March 2015, 6 days after George Osborne delivers the final budget of this government. Having undoubtedly calmed the house price inflation that was troubling the committee at its last meeting, they will be trying to establish if it was the Stamp Duty changes, their intervention on LTI caps or the threat of a Mansion Tax that has cooled sentiment in the London “bubble”. It is likely to have been a combination of all three that has had an impact, but the consideration will now be if they should rein back on the LTI caps to ensure we do not reach a period of property price deflation. Confidence is a fragile thing since the crisis and not firmly established as many commentators worry about the levels of government and personal debt still in the system together with the real imbalances still prevalent between major world economies. AMI suggests moving the 15% cap on lending over 4.5 times out to 20% as a sensible step, and that any consideration of employing Loan to Value or Debt to income caps are not required given the current state of the overall economy. June is soon enough to look at those.
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